The error message is occurring while running the installer. If we complete the install and and relicense the system, we get the following:
<<<<<
/usr/local/lsws/bin/lshttpd -V
[WARNING] Server signature does not match the license key #3.
Please request a new license key!
2012-04-10 11:09:46.698 [ERROR] [LICENSE] License key operation failure: ERR LCA.2: fail to process
>>>>>

We did release the license and tried to re-register to no avail.
And no we are not transferring the license to another server or OS. we simply want to upgrade the existing installation from 4.1.11 to 4.1.12.